"The rating reflects our view of the creditworthiness of the Public Sector Pension Investment Board, which provides PSP Capital with an unconditional and irrevocable guarantee for the CP," said Standard & Poor's credit analyst Jennifer Love.

The Public Sector Pension Investment Board (PSPIB or the fund; AAA/Stable/A-1+) was established to invest the net pension contributions of four federally sponsored pension plans (the Public Service, Canadian Forces, Royal Canadian Mounted Police, and Reserve Force). We expect net contributions for these plans to remain positive for at least 15 years, contributing to what we believe to be PSPIB's very strong net asset and liquidity position. We believe these contributions are highly reliable because they are required by law and Standard & Poor's expects no changes to the applicable legislation.

Although a Crown corporation with federal sponsors, PSPIB does not receive any form of guarantee from its sponsors. We believe the fund benefits from a strong corporate governance framework that ensures its management operates at arm's length from the federal government and acts in the best interest of its contributors and beneficiaries. We also believe that PSPIB benefits from its mandate of focusing on managing transferred assets without the distraction of direct responsibility for dealing with changes in the actuarial funding status of the underlying pension plans. Further supporting the ratings is a legal opinion the fund received, saying its debt obligations are senior to and rank ahead of amounts that become payable to the plans.

PSPIB issues debt through PSP Capital, a wholly owned and fully guaranteed subsidiary, to leverage its real estate, renewable resources, and infrastructure portfolios. As of Dec. 11, 2012, PSP Capital had about C$4.3 billion outstanding combined in its Canadian CP and medium-term note programs. The U.S. CP program will optimize the fund's cost of debt and reduce its use of forward contracts for currency hedging.